J.C. Penney Takes Shareholders on Roller Coaster Ride

J.C. Penney (NYSE:JCP) has had a difficult year. The 110-year old retailer competes in a highly consumer sensitive industry, and is in the early process of a major turnaround. On Wednesday, the company offered analysts a tour of a new prototype for its retail stores that will hopefully give it an advantage over the competition. Investors initially cheered the new design, but the enthusiasm quickly faded.

Ron Johnson, chief executive officer and former Apple (NASDAQ:AAPL) retail chief who joined J.C. Penney last year, showcased a new retail layout to 300 analysts in a 30,000 square-foot remodeled store in Texas. The revamped strategy is an effort to change consumer’s perception of J.C. Penney in order to boost sales and make it “America’s favorite store.” The strategy focuses on transforming stores into a variety of 100 branded shops and gathering areas.

“We found the JCP prototype store to be inviting and exciting, with brighter lighting and ample mannequins to better showcase an impressive array of trendy product,” explains Citigroup analyst Deborah Weinswig, according to Barrons. “The children’s area seemed to be the most developed with a cohesive suite of shops, embracing a lifestyle approach from food (the Sugar Shack shop and Paciugo Gelato) to product (Giggle, Carter’s, Disney announced today) to fun (Lego table and iPad and Mac tables).”

As the chart above shows, J.C. Penney shares surged as Johnson gave the new store concept presentation to analysts, hitting a fresh four-month high at $32.55. However, the spike was short lived as he reminded the audience that the turnaround is far from being complete. Johnson said, “It has been a very hard year. We’re planning the back half to be very similar to the first half.”

In the first six months of 2012, shares plunged more than 30 percent. In May, the retailer announced that sales at stores open at least a year fell 19 percent during the first-quarter. J.C. Penney also reported an earnings miss and a drop in revenues.

On Thursday, J.C. Penney shares experienced another rapid decline, plummeting 11.2 percent on volume of 24.8 million shares, compared to the 10-day average volume of 8.6 million shares. It is one of the worst performing names in the market, and as optionMONSTER points out, some are betting that shares continue to decline even lower. According to the financial site, a trader recently purchased 25,000 November 27 puts and sold twice as many of the November 22 puts. The trade will produce maximum gains with J.C. Penney trading down around $22 per share. Currently, shares are near $26.

Although it has been a roller coaster ride for shareholders, J.C. Penney is making progress towards its new concept. The company recently announced that at least 520 of its stores will feature Disney (NYSE:DIS) shops by next year’s back-to-school shopping season. Other major retailers such as Wal-Mart (NYSE:WMT) and Macy’s (NYSE:M) also sell Disney licensed products, but the items at J.C. Penney will be made exclusively for the company.